Up to one-tenth of senior civil servants cross-leased their properties to gain as much benefit as possible from rental subsidies, a senior government officer says.

Philip Kwok Chi-tak, chairman of the Senior Government Officers' Association, yesterday explained why the perk, known as the private tenancy allowance, was the preferred option for senior civil servants.

'Senior officers were more attracted to the private tenancy allowance [than other programmes] from the very beginning, because it does not set a time limit and provides a larger subsidy,' he said.

Mak Chai-kwong (pictured) resigned as secretary for development on Thursday in a cross-leasing controversy involving his claim for the housing allowance in the 1980s. The same day, Mak and Tsang King-man - to whom he let his own flat and whose flat he in turn rented - were arrested by the Independent Commission Against Corruption along with their wives. Mak and Tsang separately left ICAC headquarters last night.

Kwok said the rent allowance was introduced to meet the needs of senior officers recruited from overseas, who would rent homes in Hong Kong, then buy a property after retiring and returning home. An alternative - the home purchase allowance - was introduced when the government began to hire more civil servants locally in the 1980s.

But senior officers still preferred the old tenancy scheme, because the new allowance only lasted for 10 years and its subsidy amounts were reviewed less frequently, Kwok said.

The tenancy scheme paid out about 20 per cent more, on balance, than the home purchase scheme.

'Not until 1990 did the government fine-tune the purchase scheme to offer a subsidy closer to the market price of a property,' said Kwok, who joined the government in 1987 and is a senior structural engineer with the Housing Department.

Kwok acknowledged that cross-leasing - using the tenancy allowance to pay off one's mortgage - was popular among senior officers in the 1980s because of the perceived disadvantages of the home purchase allowance.

He said their tenancy allowance claims 'didn't violate any rule as long as you were not renting a flat owned by you or your family - and if you were really living in that flat. But in reality, only up to one-tenth of senior officers could do it as there were too many complications.'

These included the need to find a senior officer of the same grade entitled to the same amount of subsidy; both 'partners' finding flats of identical size; and ensuring the partner would go on renting for a certain period instead of moving into government quarters. But Mak went even further than that. He authorised his partner in the deal, Tsang, now an assistant director of the Highways Department, to sell his apartment - with Tsang doing the same for Mak - according Land Registry documents.

That has created the public perception the two men were living in their own flats and using the tenancy allowance paying off their mortgage.

27

Number of months Mak and Tsang reportedly leased to each other flats on adjacent floors in City Garden, North Point